Go to http://ExpertOptionTrading.com/videos for more free videos on About Options Trading The difference is that you can just set and forget these kinds of trades, normally. You're going to have very little downside risk. If Yahoo stock gets cut in half because the deal doesn't go through, you're going to lose $10. That's the maximum risk on this trade. Remember, if we had just the outright calls here, and it goes down to $10, we're going to lose $411 on those. Also, if the stock stays right in the middle, right where it is right now, we lose a maximum of $49.63, as you can see over here on the expiration graph. Our downside risk, if nothing happens, we lose $49. If you just bought the call outright and nothing happens, we're going to lose $411. What happens if the deal does go through? If the deal does go through, all of a sudden, the stock shoots up to $30, $35. At $35, we're making $1400 in profit. We have unlimited upside potential. Let's say somebody is crazy enough to offer Yahoo $70. We're up about $90,000, at that time. We actually have unlimited upside potential on this. It does not stop. It continues to go up and up. However, the real benefit of this kind of trade is the very limited downside risk. In fact, we can make a little bit of money, if it ends up in this area right here, between $15.50 and about $18-$19. If we trade down a little bit, we make money. If it goes up forever, we make money. If it goes down to nothing, we lose $11. In a second, I'm going to show you some of the other trades that I have on here. I think you're going to find it extremely interesting, when you begin to put together a portfolio of these kinds of trades, how dynamic this kind of trading can really be. Here's the trade. We're buying three of the October 25 calls. We're selling one of the in the money July 17.50 calls. Let's go back to our Trade tab here for a second. I'm going to show you how this is actually entered in my Think or Swim platform. What I want to do, is I don't want to sell a naked call. That is my second trade. My first trade is to purchase three of my October 25 calls here. I just want to make sure I have the right ones. Then, under the advanced order tab, instead of "Blast all" or "Single order," I want to do "First trigger sequence." In other words, when this one gets filled, then this one gets filled. That's what I'm going to do right now. I don't have to fool around with mid-point prices. All of the stocks I do this on are actively traded stocks. These are all actively traded stocks, so I'm not too concerned about mid-prices on these. I'm talking about 5 cents in between the bid and the ask, which is pretty normal for almost any kind of stock that you're going to be trading on an individual basis. This is not a spread order. This is not entered as a spread order. You are entering individual option orders. The deal is that you want to get these three long October 25 calls entered into the market first. Then, you want to sell one of the July 17.50s. You don't want to do it the other way around. For more videos on About Options Trading be sure to check out our channel: http://www.youtube.com/user/howtotradeoptions To learn more about the Expert Option Trading course go to: http://ExpertOptionTrading.com Additional Tags ================ vertical spreads, options greeks, what is options trading, option volatility, option spreads, options volatility, how to trade in options, option strategies, index options, equity options, virtual trading, options spreads, virtual options trading, options trading tutorial, option trading strategy, options trading course, how to trade stock options, options trading systems, options training, learning options, learn to trade options, option trading tutorial, options trading strategy, option trading course, option trading systems, options trading basics, option trading basics, option trading system, options trading courses, options trading training, trade options, what is a stock option, options strategies
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